El Taladro Azul Published originally in Spanish in LA GRAN ALDEA
News about supply and demand fundamentals continues to move oil prices lower despite the threat posed to oil supplies by the Hamas-Israel conflict. The increase in crude oil and product inventories in the US, weaker-than-expected data on the Chinese economy, a production increase of nearly 200 MBPD by OPEC, Russia's decision to ease the ban on diesel exports in the coming days, and the effects of the skyrocketing freight costs, together painted a picture that the market read as negative.
Prices reflected this negativity to the extent that Brent Crude broke the floor of $80/BBL, which we believe represented an exaggerated reaction, given that real demand has not shown signs of weakness, at least for now.
Saudi Arabia, as expected, blamed speculators for price movements. Saudi Energy Minister Prince Abdulaziz bin Salman declared that “the recent decline in oil prices is the product of a strategy that seeks to hide the true strength of demand,” adding that “speculators are abusing the figures, confusing a seasonal increase in export figures with an increase in production.”
Another meeting that the market is watching with interest is the visit of Iranian President Ebrahim Raisi to Saudi Arabia. Raisi attended the Organization of Islamic Cooperation (OIC) summit in Riyadh, where the Palestinian question was discussed, including his foreign minister's request to the same organization to impose an oil embargo and other sanctions on Israel.
World and regional powers have failed to reach any consensus on how to address the evolving conflict in the four weeks since Hamas fighters swept into southern Israel on October 7. The bombings in Syria by the North American air force, the Israeli advances in Gaza, and the OIC meeting once again put the danger of escalation on the table.
President Joe Biden will meet face-to-face with Chinese President Xi Jinping for the first time in a year at the APEC (Asian American Economic Cooperation) Summit in San Francisco next week. Presumably, he will try to convince Xi to persuade Iran not to intervene in the Middle East conflict.
Israel faces growing international pressure, including from the US, to step up its efforts to protect Palestinian civilians in Gaza, as the death toll rises, and fighting intensifies near hospitals and other civilian facilities. One of the collateral consequences of the conflict has been the rebirth, in different parts of the world, of the anti-Semitism that lies latent in many societies. In Germany, Prime Minister Olaf Scholz, speaking at a ceremony at a Berlin synagogue to commemorate "Kristallnacht", warned that Berlin will not tolerate any form of anti-Semitism
Although the Ukraine war has had little effect on prices in recent weeks, it is important to note that the Ukrainian government warned the Russians that if they bomb energy targets again during the winter days, then Ukraine will be forced to attack Russian targets, oil and gas tankers in Russia.
Without being major news yet, the US Department of Energy announced that it was willing to buy oil for the strategic reserve (SPR) at a price of $79 per barrel or less, during the period between December and next January.
Against this backdrop, oil prices were on a rollercoaster ride throughout the week. The first part of the week in a free fall, in reaction to the accumulation of pessimistic news, and then changed course as the weekend approached, perhaps because the fall had been an overreaction, and because concerns related to the potential expansion of the conflict in the Middle East. So, at the close of the markets, on Friday, November 10, Brent crude was trading at $81.70/BBL, while WTI was trading at $77.35/BBL, both after having recovered somewhat, more of 1.6 $/BBL on Friday. However, this was not enough to prevent the week from ending, the third in a row, with a decline in oil prices. All eyes will be on OPEC+ which, after a prolonged pause, will meet again on November 26 in Vienna to decide on its strategy for 2024.
ENERGY TRANSITION
FUEL CELLS – THE PROMISE OF CLEAN EMISSIONS
Fuel cells work like traditional batteries, but do not run out or need to be recharged: they are electrochemical devices that directly convert the chemical energy of a fuel into electrical energy and heat, as long as there is fuel, typically hydrogen (H2 ). The fact that this conversion occurs in a single step, compared to the multi-step processes (e.g., chemical to thermal energy, mechanical to electrical) involved in combustion-based heat engines, offers several important advantages, including the reduction of emissions into the atmosphere.
A fuel cell consists of two electrodes, a negative electrode (or anode) and a positive electrode (or cathode), sandwiched around an electrolyte. The electrodes consist of a porous material that is covered with a layer of catalyst. Hydrogen is passed through the anode, and oxygen (O2) is passed through the cathode. At the anode, in the presence of the catalyst, hydrogen molecules split into protons and electrons. The protons (hydrogen ions, H +) pass through the electrolyte towards the cathode, while the electrons pass through an external circuit generating direct electric current. At the cathode, in the presence of another catalyst, protons, electrons and oxygen combine to form water molecules (H₂O), which are the only emissions resulting from this process.
The first fuel cell was demonstrated in 1839 by Welsh scientist William Grove . It combined hydrogen and oxygen in the presence of an electrolyte to generate electricity and water. However, the technology did not advance significantly for more than a century. In the 1950s, Francis Thomas Bacon began developing the first practical fuel cells, motivated by the space program's need for lightweight, reliable energy sources. In 1959, Bacon demonstrated a 5-kW alkaline fuel cell system capable of powering a welding machine. NASA adopted Bacon's fuel cell technology to power the Gemini Program spacecraft in the 1960s. This further spurred the development of fuel cells for space applications. During the same decade, General Electric developed the first proton exchange membrane (PEM) fuel cells, and industry funding for fuel cell research and development increased significantly. Fuel cell vehicles and buses were tested in demonstration projects. However, high costs prevented significant commercialization. In the early 21st century, field testing of fuel cell vehicles expanded, including the first commercial offerings. Stationary fuel cell facilities also began supplying supplemental and emergency power to facilities.
Fuel cells have a wide variety of applications, including:
· Transportation: Electric vehicles equipped with fuel cells offer a clean and efficient alternative to internal combustion engine vehicles.
· Power Generation: They can be used to generate electricity in stationary applications.
· Portable Applications: They can be used to power portable electronic devices and power backup systems.
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There are several types of fuel cells differentiated by the type of electrolyte used.
Proton Exchange Membrane Fuel Cells (PEMFC):
· They use a solid polymer membrane as an electrolyte. They operate at low temperatures (below 100°C) and are ideal for transport, portable and stationary devices. They require careful water management to keep the membrane hydrated. They use platinum catalysts to increase reactivity at the anode and cathode.
Alkaline Fuel Cells (AFC):
· They use an alkaline solution, such as potassium hydroxide, as the electrolyte. They were one of the first technologies developed, with high efficiency. Sensitive to CO2, which limits their applications. Mainly used in space.
Phosphoric Acid Fuel Cells (PAFC):
· They use concentrated phosphoric acid as a non-conductive electrolyte. They operate at higher temperatures (around 200°C) with long start-up times. They are used in stationary power generation, but high costs limit their adoption.
Molten Carbonate Fuel Cells (MCFC):
· They use a mixture of molten carbonate salts as an electrolyte, allowing them to operate at very high temperatures (600-700 °C). They can use nickel catalysts instead of platinum and support various fuels. Suitable for utility-scale stationary power generation.
Solid Oxide Fuel Cells (SOFC):
· They use a solid zirconium oxide ceramic electrolyte. They operate at very high temperatures (around 1000 °C), allowing high efficiency and versatility in the use of fuels. They eliminate the need for expensive catalysts, but face material compatibility challenges. Mainly intended for stationary power generation applications.
Fuel cells show important advantages for several domestic, industrial, and mobility sectors:
· High efficiency: Fuel cells can convert fuel to electricity with efficiencies greater than 60%, compared to 30-35% for combustion engines.
· Low emissions: Fuel cells emit virtually no harmful pollutants. The only byproduct is water. This makes them ideal for sensitive environments such as indoors and for electric vehicles.
· Fuel flexibility: Fuel cells can use various fuels, including hydrogen, methane, ethanol, and other biofuels.
· Modularity: Fuel cells can be designed in modular configurations, from small watts to utility-scale megawatts.
· High reliability: They have fewer moving parts than internal combustion engines, which reduces maintenance costs and provides very reliable power and great durability.
Despite these benefits, some key challenges remain for the widespread commercialization of fuel cells:
· Cost: Current fuel cell systems remain expensive due to the high costs of key components such as membranes and catalysts. Scaling up manufacturing can help reduce costs.
· Durability: Improving the durability and life of fuel cell components is critical for transportation applications. Current objectives point to between 5,000 and 10,000 hours of operation.
· Hydrogen supply and distribution infrastructure remains a barrier to the adoption of fuel cell vehicles. Methods for distributed or onboard generation of hydrogen from fuels such as natural gas can help solve this problem.
While cost and infrastructure hurdles remain, many automakers and energy companies see fuel cells as a critical path to a sustainable energy future. Currently, there are fewer than 200 retail hydrogen fueling stations worldwide that can support fuel cell vehicles. More than 100 of these stations are in Japan and California.
According to a report from the US Department of Energy, as of 2021, more than 36,500 fuel cell systems have been shipped worldwide, totaling more than 1.1 gigawatts (GW) of accumulated capacity. Annual fuel cell shipments have increased from about 2,500 units in 2012 to more than 11,500 units in 2021, representing a compound annual growth rate of 17%. The stationary fuel cell market represents more than 95% of total deployments. About three-quarters of stationary fuel cells are installed in Asia, led by South Korea and Japan.
The number of hydrogen fuel cell electric vehicles (FCEVs) on the world's roads increased by 40% in 2022, compared to 2021, totaling more than 72,000 vehicles, according to figures from the Agency's new Global EV Outlook 2023 report. International Energy Agency (IEA). However, this is still only a small fraction of the more than 100 million passenger vehicles sold annually.
Hydrogen fuel cell installations are expected to grow to more than 25 GW globally by 2030, driven by policies that support decarbonization and energy resilience. This represents enormous growth from the current capacity of 1 GW.
In summary, fuel cells are a promising clean energy technology that converts chemical energy directly into electricity efficiently and sustainably. Overcoming the remaining barriers of cost and durability may enable widespread commercial adoption in the transportation, stationary and portable power markets. With continued research and development, fuel cells have the potential to play an important role in building a clean, electrified and diversified energy future.
VENEZUELA
Political Events.
The regime's efforts to transform the referendum on Essequibo into a strategy to polarize the population between patriots and traitors to the country have not been very successful. Not only has the opposition not taken the bait: the majority of the parties and groups registered for the “Yes” vote before the electoral referee, but they have also taken the opportunity to release countless videos that show how President Chávez mortgaged the national interests for the sake of regional political support.
Another setback for the regime occurred at the International Court of Justice in The Hague (ICJ), when they announced that they would hold public hearings in the case of the territorial dispute between Venezuela and Guyana over the Essequibo. The ICJ will hold public hearings in the case related to the Arbitration Award of October 3, 1899, to address what was presented by Guyana before the Court, on October 30, requesting precautionary measures to stop Venezuela from holding the referendum until the Court rules on the substantive issues to determine whether the Arbitration Award of 1899 is valid.
On the other hand, the hearings on human rights violations held before the International Criminal Court in The Hague are not moving in favor of the Maduro regime either. While the representation of the victims turned out to be forceful, the defenders of the regime seemed out of place and without evidence to support their allegations.
Another critical issue has been the regime's behavior regarding the primaries held by the opposition. The non-recognition of the results has been harshly criticized, and several high-ranking officials in the Biden administration reminded the regime that the liberalization of sanctions is conditional on compliance with the Barbados agreements.
On the economic side, we observe that a strong injection of foreign currency has been injected into the exchange market, which has had the desired result of maintaining the exchange rate essentially constant.
Despite the partial release of sanctions, particularly General License 44, the oil sector has not seen the flood of transactions that many expected. The only agreement concluded under the scope of LG 44 has been the signing of an agreement between the ministry, PDVSA and the French company Maurel & Prom, allegedly giving conditions that resemble the agreements with Chevron, to reactivate and develop the Urdaneta Oeste Field, assigned to the EM PetroRegional del Lago.
PDVSA has contacted service companies to restart activities in PDVSA's fields, but the problem moving forward continues to be the large outstanding debts and the risk of being able to get paid for new work, and the uncertainty regarding non-compliance with Barbado’s commitments.
Hydrocarbons Sector.
The week was relatively calm in the area of oil operations, although some clouds hung over export activities. The intention to redirect crude oil, which was originally supposed to go to the Far East, towards the North American market, faces commercial obstacles that, if not resolved, would negatively impact the November figures.
Production: An average production of 749 MBPD was reached so far in November. The geographic distribution is shown below in MBPD:
· West 134 (Chevron 54)
· East 151
· Orinoco Belt 464 (Chevron 81)
· Total 749 (Total Chevron 135)
Due to the shortage of light crude oil, incremental quantities of DCO have been produced, at the expense of Merey 16. On the other hand, Chevron is producing four segregations: Boscán, Hamaca, Merey and DCO.
Two drilling rigs continue to operate at PetroMonagas, but only 6 wells have been completed and 2 put into production.
Refining: The national refining system processed an average of 280 MBPD of crude oil and products. PDVSA affirms that the Cardón refinery is operating normally, including the catalytic conversion unit (FCC), but no increase in gasoline production has been observed. The rest of the refineries continue to operate with their limitations: Amuay in simple conversion, El Palito processing intermediate products, and the Puerto la Cruz refinery limited by the availability of light crude oil.
In contrast, Citgo, PDVSA's subsidiary in the US managed independently of Maduro’s administration, reported very good results for the 3rd quarter of 2023, both from an operational point of view (95% capacity utilization), and the safety indices achieved, resulting in an EBITDA 70% greater in compared to the previous quarter.
Exports: The difficult variable has turned out to be the export volumes. As we mentioned before, the change of destination of shipments originally destined for Asia, towards more remunerative markets, has encountered setbacks. Added to this are the limitations that Chinese private refiners have in their bitumen import quotas that the central government has to approve, which is the destination for part of the Venezuelan crude oil. Exports are also aggravated by low crude oil inventories in Venezuelan terminals. Given the production management scheme and the diluent system, about 500 MBPD of exportable crude oil is produced, but part of those volumes have to be used to fill operating inventories to reasonable levels – another proof of the instability of the oil production system.
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